Investing with debt - Opinions please!

[h2so4]

I have been an avid watcher of ST over the past year and only just starting to post. I have been learning some of the ropes with the sharemarket since I was 17 and started investing with CEN being my first purchase.

I am now 22 and after some advice from the seasoned pros please!

My situation now has changed with two rentals properties (80% financed) and between them they have a secured 30k flexi loan at 6% floating IR.
Over the years I have increased my share portfolio to include BHP CEN RYM and NZO funded by cash. Also held PRC : S

So my question: Do I start investing using my equity from my rental properties, I have invested 10k of it currently but should I expose myself more? should I be aiming for yields exceeding the IR or taking on higher risk and aiming for capital gains? NZX or ASX? I am young so I don't mind talking risks provided I can understand them.

If someone has some spare time I would love to hear stories from your investing experience. I live in Hamilton but often frequent Auckland and Wellington. I will shout the first few beers if anyone is keen!

Nice one DR, I followed a similar path.

Expect the unexpected, sharemarket crash, commercial tenacy failure, a drop in personal or business income. Good debt quickly becomes bad debt when you have to service it with other good debt cashflows.

Anyway welcome DR, I am sure you will get all your answers.

Main thing, have fun.

[shasta]

Dont worry Snoopy i wont be advising Darkred into buying PGW!

All the companies i posted about have no debt (most have reasonable cash to fund drilling campaigns) & most are low EV's under $10m, with tight capital structures & many have larger JV partners funding the drilling

[Snoopy]

Dont worry Snoopy i wont be advising Darkred into buying PGW!

All the companies i posted about have no debt (most have reasonable cash to fund drilling campaigns) & most are low EV's under $10m, with tight capital structures & many have larger JV partners funding the drilling

Having the money and technical backing to develop a mining site is dodging the question Shasta. The question was are they cashflow positive today? I suspect the answer is no.

SNOOPY

[shasta]

Having the money and technical backing to develop a mining site is dodging the question Shasta. The question was are they cashflow positive today? I suspect the answer is no.

SNOOPY

Actually Snoopy, all due respect but you seem to be dodging the main point. None of the companies i posted have ANY debt, which was the premise behind your earlier post.

Thus Darkred is not multiplying his risk by utliising debt to invest into companies with debt.

If he requires companies with reliable cashflows who pay high yielding dividends (on a sustainable ongoing basis) i have many other options for him to look at

[Snoopy]

Actually Snoopy, all due respect but you seem to be dodging the main point. None of the companies i posted have ANY debt.

Thus Darkred is not multiplying his risk by utliising debt to invest into companies with debt.

OK , I see your point and agree with this.

SNOOPY

[Snoopy]

If he requires companies with reliable cashflows who pay high yielding dividends (on a sustainable ongoing basis) i have many other options for him to look at

Actual cashflows are required to pay interest bills. Promises of cashflows don't cut it.

SNOOPY

[shasta]

Actual cashflows are required to pay interest bills. Promises of cashflows don't cut it.

SNOOPY

If he invests in companies without debt, wheres the interest coming from?

If you mean obtaining a return to cover the interest on his property loans @ 6%, there are plenty of stable companies who pay better than that!

[percy]

DarkRed,
You are getting expert advice.Here is a funny,but horribly true saying for you.
"A banker is a man who lends you an umbrella when the sun is shinning,but asks for it back as soon as it starts raining."

[RRR]

Belg - I acknowledge that you are a better user of leverage ( a rarity in share investing). But, there are still a lot of companies in NZ paying dividends higher than the bank interest rates - I dont care whether it is normal or abnormal for NZ. May be the dividend yield is not sustainable for a lot of companies, but still they are higher than the bank interest rates for the time being.

Snoopy - Are you saying that dividend yield higher than bank interest rates is normal? It has been the norm for NZ for some time but I dont think it is normal. It is abnormal - for the right or wrong reasons. May be the asset values have been pushed down too much expecting a below par growth rate. But the yield is good considering the inflation for NZ (low inflation). Market is right of course. In the developing world the growth is spectacular, but the inflation is equally spectacular.

[Snoopy]

Snoopy - Are you saying that dividend yield higher than bank interest rates is normal?

Taking the view of the last 110 years as a whole, yes.

It has been the norm for NZ for some time but I dont think it is normal. It is abnormal - for the right or wrong reasons. May be the asset values have been pushed down too much expecting a below par growth rate

Growth expectations over the last 30 yaers or so have been much higher than historical growth expectations. And that has been fuelled by higher infaltion over that period as you suggest. I woudl say the last couple of years has been a return to normal.

SNOOPY